Mahindra Satyam has to pay TDS: appellate body

India's Authority for Advance Ruling (AAR) has ruled that a class action suit is taxable in India. In a case pertaining to a Mahindra Satyam and PricewaterhouseCoopers class action suit in the US, the AAR has ruled that TDS (tax deductible at source) would be applicable to payments made on this account.

The Authority for Advance Ruling has ruled that the $125 million-class action suit settlement made by Mahindra Satyam (formerly Satyam Computer Services) is taxable.

 According to AAR ruling, the Indian IT firm has to deduct a tax of 30 per cent on $125 million, and the rest of the amount will go towards the class action settlement.

US investors who held American depository receipts (ADR) of Satyam Computer Services filed a class action suit against the company after Ramalinga Raju, former chairman of the company, admitted to an accounting fraud in January 2009, said to be the biggest in Indian corporate history.

"The settlement amount will be regarded as sum chargeable under the provisions of Section 195 of the Act ... the time to deduct the tax is when the amount is moved from the segregated account in India to the initial escrow account in the US," the AAR ruling dated 27 August said.

Tech Mahindra, which took over Satyam in 2009, had to settle all pending litigations with several investors who had claimed losses due to the shares of the firm plunging on bourses including New York Stock Exchange.